Pulse | 13 October 2025
Korean SMEs struggle from influx of cheap Chinese goods following FTA
By Kang In-sun, Kwak Eun-san, and Yoon Yeon-hae
South Korean companies are suffering increasing damage following the Korea-China Free Trade Agreement (FTA) as low-cost Chinese products are flooding into the domestic market, an analysis showed on Sunday.
According to data obtained by the office of Representative Park Sang-woong of the People Power Party from the Korea SMEs and Startups Agency (KOSME) on Sunday, the amount of support funds disbursed under the Trade Change Response Loan Program due to the Korea-China FTA accounted for 46 percent of the entire support amount between January and August this year.
KOSME provides low-interest business funds at an annual interest rate of 2 percent to small and medium-sized enterprises (SMEs) whose business is affected by trade agreements su1ch as FTAs.
Of this, loans related to China alone amounted to about half of the total.
This ratio was zero in 2015 when the Korea-China FTA was signed, but has steadily increased to 28 percent in 2018 and 44 percent in 2022.
China also accounted for the largest sales losses attributed to FTAs.
From 2015 through August this year, KOSME recognized a total of 96.6 billion won ($67.57 million) in FTA-related sales losses tied to China, accounting for 29 percent of the overall 331.4 billion won.
This placed China first among 10 regions including the United States, India, ASEAN, and Turkey.
The lawmaker’s office said that most of the damage from the Korea-China FTA occurred in domestic-market manufacturers rather than export-oriented firms.
The hardest-hit sectors were electronic components, auto parts, machinery, and consumer goods. Analysts attribute this to a mismatch between the rapidly changing environment surrounding Korea and China over the past decade and the outdated trade system represented by the FTA.
“The first-phase Korea-China FTA signed in 2015 mainly covered materials, parts, and equipment - areas where Korea’s competitiveness has gradually weakened,” said Park Soong-chan, dean of Yongin University’s Institute of International Affairs.
Experts noted that with Chinese products gaining both price and quality competitiveness, the lowered trade barriers are now in turn hurting domestic industries.
Calls are growing for a new phase of Korea-China FTA that reflects the changed trade environment between the two countries.
Experts suggest strengthening cooperation in sectors where Korea still needs China - such as tourism, services, and green technology.
“Since the signing of the Korea-China FTA, the flood of low-priced Chinese goods has caused SME losses to snowball each year,” Park said. “It is time to closely re-examine our trade structure with China and push for renegotiation of the unbalanced Korea-China FTA, under which only China enjoys real benefits.”